Why Canada Lags on Wireless

By encouraging competition and capping contractual terms, Canada could begin to correct our reputation for being weak on wireless.

Where does Canada stand with respect to the cost of wireless services? That question recently generated a spirited debate when the Organization for Economic Co-operation and Development released new figures that ranked it as the third most expensive developed country. Critics pounced on the report, calling the results ridiculous and pointing to perceived flaws in the methodology.

Given that consumers have a hard time making sense of the different plans, options, and hidden fees offered by Canada’s big three wireless providers (Rogers, Bell, and Telus), it should come as little surprise that comparisons of wireless services across dozens of countries are exceptionally difficult to make. Some countries charge consumers for both incoming and outgoing calls, while many others do not. Moreover, hidden charges such as Canada’s system access fee – which can add as much as 25 per cent to a monthly bill – are often excluded from cost calculations.

While the debate will continue to rage, few currently hold Canada up as a model of wireless leadership. If not pricing, what should policy makers and politicians be focusing on? My weekly technology column (Toronto Star version, homepage version) argues that four main issues come to mind.

The first is competition, particularly among GSM providers. While this will change later this year, for the moment Rogers is the only GSM provider in the country. Since GSM has emerged as the dominant global wireless technology, this has had big consequences for consumer choice and marketplace competition. Most new devices, such as the popular Apple iPhone, are available only for GSM providers, meaning that Rogers has enjoyed a virtual monopoly on the hottest devices.

Although the government has been reluctant to publicly acknowledge its competition concerns, recent policies suggest that it would like to see a more competitive environment. The clearest indication came during the 2008 spectrum auction, in which, over the objections of the incumbents, some spectrum was reserved exclusively for new entrants.

There is another spectrum auction on the horizon that holds the possibility of opening the door to further competitors, particularly if Industry Minister Tony Clement is willing to revisit foreign ownership restrictions.

The auction also provides an opportunity to address the second issue – wireless net neutrality. The current "walled garden" approach adopted by Canadian carriers in which they frequently control the applications that run on their networks has already attracted the attention of the CRTC. It has ruled that new regulatory requirements are needed to counter the resulting competition concerns.

Transparency in pricing should also be addressed. Canadian carriers continue to levy system access fees as a separate charge, despite the fact that they are nothing more than an additional cost to consumers. Moreover, carriers often bury significant usage restrictions in the fine print, leaving consumers without a true sense of the cost of their mobile phones. Clear guidelines on disclosures would enable consumers to better choose among providers.

Fourth, the length of consumer contracts further stymies competition. Canadian wireless carriers attempt to lock consumers into contracts for far longer than virtually any other developed country, with three-year contracts considered the norm. Several years ago Canada instituted wireless number portability that allows consumers to keep their numbers when switching providers. While designed to fuel greater competition, the policy has largely failed, owing to the combined effect of a single GSM provider (meaning consumers often lose their device when switching providers) and long-term contracts.

Debates about wireless pricing may be addressing the right concern with the wrong question. Instead, Canadians should be focused on competition, walled gardens, pricing transparency, and a cap on contractual terms.